Background
Probis Financial Services Pty Ltd entered administration in July 2023 and commenced proceedings against William Waileung Kong in September 2023. The joint administrators, later liquidators, alleged broadly that funds Probis placed with Mars Cap Limited were held on trust and were disbursed to third parties at Mr Kong’s direction. A worldwide freezing order against Mr Kong had previously been continued pending the proceeding.
In June 2026, about three years after the case began and six months before the listed trial, Mr Kong first sought security for his future costs. Probis was admittedly impecunious. Mr Kong sought approximately $646,000 in security, while the liquidators said they had already incurred about $720,000 in costs and were being supported by their firm, Hall Chadwick.
The Court’s Holding
Justice Goodman dismissed Mr Kong’s interlocutory application for security for costs and ordered him to pay the applicants’ costs of the application. Although Probis’s impecuniosity enlivened the Court’s discretion under s 1335 of the Corporations Act 2001 (Cth), the question remained whether security should be ordered as a matter of fairness.
The decisive consideration was the significant, unexplained delay. Mr Kong knew Probis was in administration when the proceeding began and public information in 2024 showed limited cash reserves, yet did not foreshadow security until June 2026. The Court found actual prejudice because Probis had paid a creditor dividend that the liquidators said they would not have paid had security been sought promptly; those funds could otherwise have been available for security.
There was a real but unquantifiable risk that security might stultify the proceeding, which the Court treated as neutral. Hall Chadwick’s funding support did not alter the balance: it expected reimbursement without a commercial funding return or uplift, making its position analogous to a solicitor acting conditionally rather than a person standing behind the litigation for profit.
Key Takeaways
- A corporation’s insolvency does not automatically entitle a defendant to security for costs.
- Security applications must be made promptly; unexplained delay can be decisive.
- Prejudice from delay may be established where the plaintiff has incurred substantial costs or distributed funds that could have been retained for security.
Why It Matters
The decision reinforces that security for costs is a protective measure, not a tactical option to be raised after a corporate plaintiff has substantially committed to litigation. Defendants should assess and pursue security early, particularly where insolvency is evident from the outset.
It also confirms that a liquidator’s firm supporting litigation without a commercial uplift is not, merely for that reason, a funder whose own assets should be treated as available to satisfy a security order.